The 0 DTE Options Trade Nobody Talks About (Option Omega 5 year backtest)

[@loubob21]

Works best in low IV environment. You can see that because 5/22 thru 5/23 was flat and then profits took of which mimics the recent bull surge since 10/23.

[@Gave7127]

Great video. I use Option Omega on a daily basis for backtesting and find it very realible. Are you planning to add more tickers to your programm in the future ? It would be a great help.

[@OptionOmega]

We're open to it if they're liquid enough for high confidence backtesting!

[@davidebrambilla9782]

@@OptionOmega vix is possible pls?

[@benfbrown]

Matt, would love to see you keep working on this one.

[@OptionOmega]

Plenty of long condor ideas to test!

[@danielperkins9347]

Had more time to think about this. Curious what it looks like with no short leg. Just for comparison sake.

[@OptionOmega]

Yes, super easy to backtest :)

[@powerfuloptions]

Why not run a straddle from mid day to open, add the vix drop at entry. So you set trigger to allert 1% drop on vix, enter 7 DTE staddle, close at open or power hour. You would have the compression working for yoh rather than against you

[@OptionOmega]

We could do a future video about this. Trivial to setup the backtest :)

[@powerfuloptions]

@OptionOmega it would probably help people to understand in an actual example how option prices work. And timing matters

[@chuckwoolery9005]

This crushed it today on SPX

[@ThatGuySyndrome]

This looks a whole lot like a long .5% 0dte out of the money call or call spread in SPX left to expire fully each day. I gaurantee you almost all the profits are from the call side.

[@pv3201]

Not sure why my original comment was deleted but I was curious about this so I ran the backtest with no put side, everything else identical. It makes $170k over the test period (vs $90k for the full RIC), at the cost of a higher max drawdown of -25%.

[@ethandeanking]

This becomes profitable when vix goes down but the inverted iron condor needs volatility to make money, how does this make sense?

[@OptionOmega]

The ENTRY is based on VIX moving down from previous close (4:15) to open (first print). Other than that, the RIC doesn't care what the VIX does--- it just wants to m000000ve

[@powerfuloptions]

The strategy works because when VIX went down the risk is reduced and the price is ranging (low Vega environment). The reverse condor, like a straddle, is placed in time of low volatility in anticipation of increased volatility. You have to know what you need the market to do when you place the trade, this will determine the advanced strategy you would use. If volatility is high at open, like he was testing the straddle at open, which is a period of high volatility, then goes to period of low volatility, it will not work, obviously. As the strategy requires new movement and increase in volatility relative to entry. That's why you put a short straddle (or short strangle) or iron condor at open, and then the options lose Vega and Theta in the mid day. You gain from theta and Vega death. When you open in slow market and you think you will have a period of volatility, gamma and increase in vega give you enough of a boost to overcome theta death. Does that make sense?

[@powerfuloptions]

​@@OptionOmega but it moves on news or a catalyst of any sort. Japanese like to call it the market squatting before it sprints. That was the problem with your long straddle test. If you had a compression or consolidation period, like the vix going down, you would have similar or better results if you got the movement. For example long straddle or strangle are good before the fed speaks, or some announcement that happens during the day. Or, from afternoon to power hour or to open, you should give a longer DTE if you are swinging overnight. You can leg out or close right after open when volatility spikes. (Good strategy for ranging market). If you truly want to talk about a strategy no one talks about, that would be selling European options ATM and buying them back OTM. You get the Gamma drawdown and theta acceleration. You can do them as legs or iron condor. If you have the capital, gain is going to be better if you can sell naked and buy back. You easily get 20% in minutes. Also, good for range days.

[@ethandeanking]

@@powerfuloptions now that does make sense. Thanks for the detailed explanation. I’m not an options noob but by no means am an expert. It’s hard to really put together than a market open at lower volatility could actually mean more often than not that the market is opening low to move and increase volatility coming off of calm.

[@dthdjddhd]

can we place stoploss on ce and pe leg of straddle

[@OptionOmega]

What do you mean by CE and PE?

[@dthdjddhd]

@OptionOmega ce = call option, pe put option. Let's say I short a call option for 10 dollars in SPX 0DTE. If the market keeps going up and my shorted call option starts to give me a loss, I want to place a stop-loss order at 12 dollars to cut my loss. Can I keep this in the backtest?

[@dthdjddhd]

@OptionOmega CE = CALL OPTION, PE= PUT OPTION. Let's say I short a call option for 10 dollars in SPX 0DTE. If the market keeps going up and my shorted call option starts to give me a loss, I want to place a stop-loss order at 12 dollars to cut my loss. Can I keep this in the backtest?

[@dthdjddhd]

@OptionOmega ce call option, pe put option Let's say I short a call option for 10 dollars in SPX 0DTE. If the market keeps going up and my shorted call option starts to give me a loss, I want to place a stop-loss order at 12 dollars to cut my loss. Can I keep this in the backtest?

[@dthdjddhd]

Ce call option, pe put option. Let's say I short a call option for 10 dollars in SPX 0DTE. If the market keeps going up and my shorted call option starts to give me a loss, I want to place a stop-loss order at 12 dollars to cut my loss. Can I keep this in the backtest?

[@danielperkins9347]

Very interesting

[@OptionOmega]

That's the consensus!

[@johngutierrez2687]

So if I am Understanding this correctly you log in anc check if the vix has gone down that morning (like on a Green Day) and on those days open an reverse iron fly. Buy the straddle, sell the strangle. Then you hold til expiration. Am I missing anything?

[@OptionOmega]

This is the backtest-- just open if VIX is down (from overnight 4:15 close to first price after 9:30).... of course, there are many, many better backtests and variations on this theme....

[@powerfuloptions]

You need something to move the market. Vix does down in risk off days too. Just low volume. We also say sht floats in low pressure because the markets will just float up all day if nothing is going on. No pressure to sell or buy. Typically, there are days that positions are being sold into increase in price. Positions are being unloaded. Look at charts where the price just makes short green candles for hours on in. They are selling. :-) and big moves coming. Get yourself a longer dated position than 0dte

[@johngutierrez2042]

Do you think you could do a backtest on the opposite strategy? If the Vix is up, sell an iron fly and see how that does?

[@OptionOmega]

@@johngutierrez2042 Sure.

[@JohnHumbert]

@@johngutierrez2042 Good idea!

[@Wolfgang-ij1jj]

Link is not working.

[@OptionOmega]

It works. Must be a logged in OO subscriber to view :)

[@powerfuloptions]

Long straddles work best from compression to expansion. If you move it from open to from afternoon into close or next day open, you will do much much better because you need to introduce high vega for that kind of trade to do well. Please understand that there are better set ups for different strategies, you can't just stick them wherever and say they don't work. Obviously, they will not work when their math would not work.

[@MrCaptmunch]

All the commentary convolutes the strategy